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U.S. Military (Ret.): Go straight to state websites to clear up retirement-tax rules

Jun. 16, 2011 - 01:35PM   |   Last Updated: Jun. 16, 2011 - 01:35PM  |  
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A. After double-checking this, the answer is more complicated than it seemed at first glance. Kentucky does not tax military retirement pay for those who retired in 1997 or earlier.

For those who retired after 1997, military retirement pay of up to $41,110 is excluded from state tax. That effectively covers all but the most senior and longest-serving personnel. But still, it's not quite the same as saying that Kentucky never taxes military retirement pay.

As I mentioned in my column, state tax laws vary. Your best bet for the final word on how states treat military retirement pay for tax purposes is the official websites of the individual states. Look on their Web pages that deal with state taxes.

Another letter on the same column came from retired Army Maj. Gen. Manila Shaver, who wrote that North Carolina has an unusual situation regarding state taxes on military retirement pay.

Shaver said a lawsuit many years ago stipulated that government employees, including service members, who began their government service on or before Aug. 12, 1984, do not have to pay state taxes on their military retirement pay.

I double-checked, and Shaver is correct. In addition, those who began government service after Aug. 12, 1984, can deduct $4,000 of their annual retirement benefits from state taxes.

In my June 6 column, I did not list North Carolina as one of the states that doesn't tax military retirement pay mainly because I was aiming the column at people who are still in service and nearing the end of their careers, most of whom presumably joined the military after 1984.

Again, the best, most current information is going to be found on the official websites of the individual states. In researching the above issues, I came across a website that lists fairly detailed tax information for each state at http://retirementliving.com/RLtaxes.html.

It's hard to tell how often the information on that website is updated, but embedded in the section for each state are direct Web links to that state's department of revenue, the ultimate sources for state tax information.

Retired Command Master Chief Alex Keenan served 28 years in the Coast Guard. Email him at retired@militarytimes.com">retired@militarytimes.com.

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